Food-Delivery Startup Deliveroo Picks Up $25 Million in Series B Funding

When it comes to food-delivery startups, investors have a seemingly insatiable appetite.

London-based Roofoods Ltd., doing business as Deliveroo, is the latest such company to secure new institutional funding, scooping up $25 million and signaling the mature sector is still developing.

Fred Destin, a partner at Accel Partners who led the Series B round, said he even surprised himself by investing because he considers the sector quite crowded. He said unlike large players Delivery Hero GmbH, which raised $350 million a few months ago, and Just Eat Ltd. and GrubHub, which both went public last spring, Deliveroo only focuses on high-end restaurants in densely concentrated areas.

The two-year-old startup also doesn’t act as an aggregator of existing food-delivery services or online ordering for pickup food. Customers visit the Deliveroo site, type in their address, when they want their food delivered and then choose from nearby restaurants. Once they order, the restaurant is notified via a tablet, which Deliveroo provides. When the food is ready, the restaurant dispatches a driver by taping a button and the most appropriate delivery person completes the transaction. All deliveries are done on scooters and bicycles.

The average delivery time from customer order to delivery is 32 minutes, with 24 of those minutes representing kitchen prep time, according to the company.

“This is a local play,” Mr. Destin said. “If the restaurant is an hour away and it arrives cold that actually defeats the purpose.”

Deliveroo Chief Executive William Shu declined to discuss revenue or share customer numbers. Deliveroo charges customers roughly $3.80 for each delivery and charges restaurants a percentage of the total order.

Since launching two years ago, Deliveroo has grown from three to 750 restaurants in London and now also serves Manchester and Brighton.

“We’ve gotten a lot of traction without much advertising spend,” Mr. Shu said, adding 80% of order on any given day are from repeat customers.

He said he would use the funds to expand to other cities that are densely populated with people and restaurants and affluent. He expects Deliveroo will be in 15 cities in Europe and the Middle East by the end of the year.

Along with scaling operations, Deliveroo will focus on improving algorithms to reduce delivery times and help delivery contractors improve their service and speed.

Existing investors Index Ventures and Hoxton Ventures participated in the Series B round alongside new investor Hummingbird Ventures. The company previously raised $4.8 million

Investors in the Series B round valued Deliveroo at just over $100 million, VentureWire learned.

[Correction: An earlier version of this story incorrectly characterized the company's valuation.]